California energy-rebate program draws few takers

Few applicants for state initiative to raise efficiency

Updated 10:36 pm, Friday, December 27, 2013

California's 3-year-old effort to improve the energy efficiency of 100,000 homes has fallen far short of its initial goals, upgrading about 12,200 so far, state data show.

Originally funded through President Obama's stimulus package, Energy Upgrade California offers rebates worth up to $4,500 for homeowners who swap out their old furnaces and duct work, install insulation, seal leaky window frames or take other steps to make their houses more efficient.

The program burned through at least $146 million of stimulus money in its first two years alone, in addition to $91 million drawn from local governments and Californians' utility bills. But relatively few homeowners have signed up.

When Energy Upgrade started in 2011, California was still clawing its way out of a deep recession. Residents were hesitant to sink thousands of dollars into home renovations, even if the rebates would later cover some of the costs. Banks balked at loaning money for the work.

Now, even as the economy improves, participation remains low, with just 3,917 renovation projects this year.

And yet state officials don't want to abandon Energy Upgrade.

Climate goals

While California has steadily tightened efficiency standards for new construction, the state has a vast stock of old houses that weren't built with energy conservation in mind. And cutting energy use in homes - old and new - is essential to California's fight against climate change. Improved efficiency means fewer new power plants spewing greenhouse gases into the air.

"Long term, if we want to hit our climate goals, we have to crack this nut of how to get whole-house upgrades, how to get retrofits in existing buildings," said Edward Randolph, director of the energy division at the California Public Utilities Commission. The commission coordinates the rebate program, which is largely run by California's utility companies.

Energy Upgrade's expensive start rankled consumer advocates.

Through 2012, the program spent less on rebates than it spent on startup costs, marketing and contractor training. Administrators also ended up giving loans to participating homeowners - in addition to the rebates - when banks proved reluctant to lend money for the renovations.

This year, the program's funding ratcheted back to about $31 million, all of it drawn from utility customers' bills. For a typical residential customer of Pacific Gas and Electric Co., funding Energy Upgrade costs about 10 cents per month, according to the utility.

As a result, some former critics now say the program is worth continuing - provided the costs keep coming down.

"The jury is still out on whether it's cost effective," said Mark Toney, executive director of The Utility Reform Network, a consumer watchdog group. "We don't think it's there yet."

Toney sees Energy Upgrade as one potential way to address energy use in homes. But the program itself, he said, needs to be more efficient.

"We think that the program has a lot of potential," he said. "It's a fact that it costs a lot of money to do a whole-house retrofit - that's just how it is. What we like about the program is that it's designed to leverage private money. That's a good thing."

Energy Upgrade California started with grand goals.

State officials saw it, in part, as a way to create jobs. California already had a successful rebate program for homeowners who install solar panels, and those rebates had helped create a thriving solar industry in the state. Energy-efficiency rebates, officials hoped, could do the same.

The California Energy Commission, which ran the program in its first two years, initially predicted that Energy Upgrade would renovate 100,000 homes, without specifying a time frame.

But generating interest proved to be difficult.

Dearth of projects

In 2011, the program funded just 2,538 renovation projects, according to data from the utilities commission. That number jumped to 5,627 in 2012, in large part because administrators in Los Angeles County tried emphasizing less complicated and less costly upgrades. The utilities commission, however, wanted greater energy savings than those cheaper measures provided, leading Los Angeles administrators to freeze the program for much of 2013. As a result, the number of projects statewide fell to 3,917 this year.

In the total number of projects funded to date, the utilities commission also counts 123 projects from 2010, when utilities experimented with their own rebate programs that were folded into Energy Upgrade the following year.

In addition, the program funded more than 3,720 energy-efficiency projects at businesses during its first two years. Now, however, the Energy Upgrade rebate program focuses solely on homes.

While many Californians are keenly aware of their home-energy use, many aren't. Getting their attention has been difficult, people involved in the program say.

"Surveys have shown that the average American spends 9 minutes a year thinking about their electricity, and that's just the time they spend paying the bill every month," said Rory Cox, a regulatory analyst at the utilities commission. "It's going to be a challenge."

Indeed, much of Energy Upgrade's spending during its first two years went into efforts to reach the public. Along with marketing, the program educated building contractors, using them to spread word of the rebates to homeowners considering renovations.

The state also created a website to advertise the rebates. That site is now being retooled, because California officials have decided to expand the name "Energy Upgrade California" to cover multiple state programs focused on energy efficiency and small-scale power generation - not just the home rebates.

Even people who want to use less energy at home may balk at the expense.

The Energy Upgrade rebates were designed to cover just a portion of the total cost of each home retrofit, projects that can easily top $10,000. The rebates are issued after the fact, not up front. And while smaller rebates are available for less-extensive work, the biggest rebates - for $4,500 - go only to renovation projects that increase a home's energy efficiency by 45 percent.

Major investment

"It's a significant investment that homeowners have to make, going in and making major retrofits to your home," said Steve Malnight, vice president of customer energy solutions at PG&E. "That's not something people do lightly."

But he, too, sees worth in the program. Somehow, California needs to improve the efficiency of its older homes, he said. And since most homes go years between major renovations, the state needs some way to persuade homeowners to think of energy efficiency when they decide to do the work.

"We need to think of this as a targeted program, going after older homes that are ready for upgrades," Malnight said. "If we miss that window, we miss it for a very long time."

Projects program covers

Energy Upgrade California offers rebates for projects that make homes more energy-efficient. To get the largest rebate available, $4,500, renovations must improve a home's efficiency by 45 percent. Smaller rebates are available for less-extensive projects. Some of the work covered:

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